COMMONWEALTH OF MASSACHUSETTS
APPELLATE TAX BOARD
CHELMSFORD MOBILE HOME PARK v. BOARD OF ASSESSORS OF
PROPERTIES, LLC, Successor THETOWN OF CHELMSFORD
to CJD REAL ESTATE, LP[1]
Docket Nos. F298316 Promulgated:
F304236 June 24, 2011
These are appeals under the formal procedure, pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the appellee to abate taxes on certain real estate in the Town of Chelmsford assessed under G.L. c. 59, §§ 11 and 38 for fiscal years 2008 and 2009.
Commissioner Mulhern heard these appeals. Chairman Hammond and Commissioners Scharaffa, Egan, and Rose joined him in the decisions for the appellant.
These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.
Gregg S. Haladyna, Esq. for the appellant Chelmsford Mobile Home Park Properties, Inc.
Robert Kraus, Esq. for intervener Massachusetts Manufactured Housing Association, Inc.
Richard P. Bowen, Esq. and Jeffrey Honig, Esq. for the appellee.
FINDINGS OF FACT AND REPORT
On January 1, 2007 and January 1, 2008, the appellant, Chelmsford Mobile Home Park Properties, LLC successor to CJD Real Estate Limited Partnership (the “appellant”), was the assessed owner of a number of contiguous parcels of real estate located at 270-288 Littleton Road in the Town of Chelmsford (the “subject property”). At all relevant times, the appellant operated the subject property as a manufactured home park, named Chelmsford Mobile Home Park (the“Park”). The subject property consists of approximately 37.75 acres, improved with roads, 254 site pads, and other infrastructure necessary for the operation of a manufactured home park. There are also four residential cabins and a commercial building, the second floor of which is used as an office and the first floor as a Laundromat.
For fiscal years 2008 and 2009, the Board of Assessors of Chelmsford (the “assessors”) valued the subject property at $11,530,500 and $11,635,300, respectively. The assessors assessed taxes on the subject property at the rates of $13.50 per $1,000 for fiscal year 2008 and $14.07 per $1,000 for fiscal year 2009, resulting in tax assessments of $155,661.75, plus a Community Preservation Act (“CPA”) surcharge in the amount of $2,314.68, for fiscal year 2008 and $163,708.67, plus a CPA surcharge in the amount of $2,434.53, for fiscal year 2009. On December 26, 2007 and December 29, 2008, the Tax Collector for Chelmsford caused the town’s actual tax bills to be mailed for fiscal years 2008 and 2009, respectively. In accordance with G.L. c. 59, § 57C, the appellant timely paid each fiscal year’s taxes without incurring interest.
On January 30, 2008 and January 30, 2009, in accordance with G.L. c. 59, § 59, the appellant timely filed Applications for Abatement with the assessors for fiscal years 2008 and 2009, respectively. The assessors denied the appellant’s abatement application for fiscal year 2008 on April 30, 2008; the appellant’s abatement application for fiscal year 2009 was deemed denied on April 30, 2009. In accordance with G.L. c. 59, §§ 64 and 65, the appellant seasonably appealed these denials by filing Petitions Under Formal Procedure with the Appellate Tax Board (the “Board”) on July 28, 2008 for fiscal year 2008 and July 24, 2009 for fiscal year 2009. On the basis of these facts, the Board found and ruled that it had jurisdiction over these appeals.
The appellant couched the issue in these appeals as one of exemption. It claimed that the assessors valued the subject property at $3,873,600 in fiscal year 2007, but then raised the assessment to $11,530,500 in fiscal year 2008 and to $11,635,300 in fiscal year 2009, by improperly including in the assessments the value of some 255 exempt manufactured homes located in the Park.[2] According to the appellant, these manufactured homes qualified for the statutory exemption for manufactured homes under G.L.c.59, § 5, cl. 36 (“Clause 36”)[3] and, therefore, should not have been included in the appellant’s real estate tax assessment or assessed a personal property tax. The appellant further contended that the hearing of these appeals should therefore be limited to evidence necessary for a determination of whether the $7,650,000 portion of the assessment, which the appellant claimed the assessors attributed to the manufactured homes located at the Park, should be abated in full because of the exemption.
The assessors asserted that the appellant’s view of the scope of the hearing was unduly restricted. The assessors claimed that the Board should admit evidence relevant and material to the more general issue of whether the assessors had overvalued the subject property for the fiscal years at issue.[4] They further argued that, even if the appellant’s burden of proof required it to prove here that the manufactured homes were exempt, the appellant still had to show that the subject property’s fair cash value for each of the fiscal years at issue was less than its assessed value.
As a threshold matter, and as more fully explained in its Opinion below, the Board agreed with the assessors regarding the scope of the hearing. The issues here were not limited to a mere determination of exemption, but necessarily included a finding on overvaluation. Even if the Board found that the manufactured homes were exempt, it could not abate the $7,650,000 portion of the assessment purportedly allocated to the manufactured homes unless the assessment that the assessors had placed on the subject property as a whole for fiscal years 2008 and 2009 actually included values for the manufactured homes and exceeded the subject property’s fair cash value, excluding the value of the exempt manufactured homes for those fiscal years. It is undisputed that, at all relevant times, the assessors never sent real estate or personal property tax bills to the individual owners of the manufactured homes or personal property tax bills for the manufactured homes to the appellant. Accordingly, the only assessments at issue in these two appeals are the two on the subject property – the Park – for the two fiscal years at issue. To the extent that the value of the manufactured homes might have been included in the subject property’s assessments, it would have had to have been as a component of those two assessments.
In deciding whether to abate an assessment, the Board must consider the value of the property as a whole and not just the property’s component parts. Only if it is proven that the fair cash value of the property as a whole is less than the assessment will the Board order abatement, even if the methodology that the assessors used for establishing the assessment is flawed or improper. If the evidence shows that the assessment is less than or equal to the subject property’s fair cash value, the assessment stands.
The appellant called two witnesses to testify in its case-in-chief. The first witness was Francis Reen, the Chief Assessor for Chelmsford. Mr. Reen readily conceded that, at all relevant times, the Park was a manufactured housing community licensed by the Chelmsford Board of Health under G.L. c. 140, § 32B and that the operator of the Park paid the requisite monthly licensing fee pursuant to G.L. c. 140, § 32G. Accordingly, the assessors considered the manufactured homes located in the Park to be exempt under Clause 36, and did not assess a personal property tax on the manufactured homes located at the Park.
Mr. Reen also testified about the various valuation components on the subject property’s fiscal year 2008 property record card. According to Mr. Reen, the assessors assessed the subject property’s land at $3,655,100, four residential cabins at $159,200, a commercial office and laundry building located at the Park for $66,200, and the site pads for the manufactured homes at $7,650,000, for a total valuation of $11,530,500. For fiscal year 2009, the assessors set those values at $4,142,400, $159,200, $66,200, and $7,267,500, respectively, for a total valuation of $11,635,300. Mr. Reen insisted that the assessors did not value the manufactured homes themselves for real estate tax purposes but rather were valuing the site pads for the manufactured homes, which the assessors had neglected to assess before fiscal year 2008. Certain other evidence suggested that the assessors may have misconstrued or misspoken about the taxability of the manufactured homes as real estate when preparing the Park’s fiscal year 2008 assessments before clarifying their rationale.[5] There is no dispute that the assessors did not maintain property record cards for the manufactured homes.
Mr. Reen further testified that the assessors used an income approach to value the Park. Because the appellant failed to provide the assessors with income and expense information, the assessors relied on “secondary sources,” such as the monthly license fee statements and expenses and income from other rental properties, for that data. The assessors’ income approach, which is based on the average monthly site-pad rental that the appellant charged the owners of the manufactured homes, is summarized in the following table.
Summary of the Assessors’ Income Approach
Gross Income ($500/month x 255 units x 12 months) / $ 1,530,000Vacancy @ 4% / (61,200)
Expense Allowance @ 20% / (293,760)
Net Income / $ 1,175,040
Capitalization Rate (including tax factor) / 9.50%
Value / $12,368,842
The appellant’s second witness was David G. Piper, Jr.[6] At the time of his appearance, Mr. Piper was operating two manufactured housing communities and was the President of the Massachusetts Manufactured Housing Association. He had recently completed a four-year term on the Commonwealth’s Manufactured Housing Commission. Before testifying, he had inspected the exterior of the manufactured homes in the Park and, relying on his familiarity with manufactured homes and related state laws and regulations, confirmed that the Park’s manufactured homes complied with the definition of “manufactured homes” under G.L. c. 140,§ 32Q. In his capacity as an experienced operator of parks for manufactured homes, Mr.Piper also testified that expenses associated with the operation of manufactured housing parks are ordinarily one-third of the park’s gross income, while occupancy rates now approach one-hundred percent because of the scarcity of parks, particularly in the eastern part of the state, and the downturn in the economy. The leases at the parks which he operated included in their rent clauses provisions requiring the lessees to pay base rent, real estate taxes, licensing fees, and water and sewer charges. He related that increases in his parks’ taxes, fees, and charges were usually passed on to the tenants in the form of increased rent. On cross-examination, he acknowledged that he never reviewed the subject Park’s financials and was not familiar with the specific details relating to the Park’s categories of income and expenses. The appellant did not present any testimony or other evidence from a real estate valuation expert.
The assessors called William A. LaChance to testify as their real estate valuation expert. Based on his education, appraisal designations, experience, and background appraising and researching manufactured housing communities,[7] the Board qualified Mr. LaChance to testify in these appeals as a real estate valuation expert. Using income-capitalization and sales-comparison approaches, Mr.LaChance valued the Park, as of January 1, 2007, at $10,000,000 and $9,950,000, respectively. Ultimately he relied predominantly on his income-capitalization approach in reconciling these estimates at $10,000,000. Mr.LaChance also indicated that the market was stable between January 1, 2007 and January 1, 2008.
In his sales-comparison approach, Mr. LaChance examined five manufactured-housing-park sales in Massachusetts and New Hampshire, which occurred from January, 2002 to April, 2007. The sale prices ranged from $3,000,000 for a 117-pad site to $15,485,700 for a 392-pad site. A summary of the manufactured housing communities’ sales data appears in the following table.
Summary of the Assessors’ Real Estate Valuation Expert’s Sales-Comparison Approach
Sale 2 Sale 1 Sale 3 Sale 4 Sale 5
Lindenshire MH ParkExeter, NH / SUBJECT
Chelmsford, MA / Oakhill Home-town America
Attleboro, MA / Rocky Knoll West
Taunton, MA / Forest Park Estates
Jaffrey, NH / Pine Ridge Estates
Loudon, NH
Sale Date* / April
2007 / January
2007 / January
2006 / January 2005 / April
2005 / January
2002
Sale Price* / $15,485,700 / $11,530,500 / $6,990,000 / $3,450,000 / $3,000,000 / $4,500,000
Area in Acres / 89 / 37.75 / 49 / 68.6 / 50.16 / 148
# of Site Pads / 392 / 254 / 175 / 125 / 117 / 148
Site Pads/Acre** / 4.4 / 3.6 / 1.8 / 2.3 / 1.0
Occupancy / 98% / 98% / 100% / 98% / 100% / 99%
Net Oper. Inc.** / $1,238,850 / $510,000 / $280,000 / $219,384 / $418,523
Cap. Rate** / 6.5% / 7.3% / 8.0% / 7.3% / 9.3%
Sale Price/Pad** / $39,504 / $39,943 / $27,600 / $25,641 / $30,405
*For the subject property, the sale date and price are the assessment date and amount for fiscal year 2008.
**The rows left blank correspond to Mr. LaChance’s pro forma.
Mr. LaChance concluded that his comparable sales’ characteristics and the Park’s were sufficiently similar to warrant adjustments only for location and physical attributes. The pertinent differences in physical characteristics that he deemed important were the availability of public sewer, the density of the pads, and the condition of the infrastructure. He found that Sale 1 in Attleboro, Massachusetts and Sale 2 in Exeter, New Hampshire shared comparable locations with the Park. Recognizing the age of Sale 5, he only included it to illustrate “the existence of a multi-million dollar market for such properties as well as showing that capitalization rates had declined from 2002 to 2007.”